EX-99.1 2 a07-20895_1ex99d1.htm EX-99.1

Exhibit 99.1

Tetra Tech Reports Third Quarter Results
Achieves 50% EPS Growth and New Record Backlog

Pasadena, California. Tetra Tech, Inc. (NASDAQ: TTEK) today announced results for the third quarter ended July 1, 2007.  The Company achieved its revenue and earnings guidance for the quarter, together with achieving 50% EPS growth and new record backlog.

Third Quarter Results

Revenue in the quarter was $404.0 million, up 12.5% from $359.1 million, and revenue, net of subcontractor costs, was $256.3 million, up 6.7% from $240.2 million for the same quarter last year.  Income from operations for the quarter was $22.1 million, up 36.8% from $16.1 million for the same quarter last year.  Net income for the quarter was $12.4 million, up 58.4% from $7.8 million for the same quarter last year.  Diluted earnings per share (EPS) for the quarter was $0.21.  This represents a 50.0% increase from $0.14 for the same quarter last year, which included a one-time $0.03 stock-based compensation charge.  Backlog at the end of the quarter was a record $1.2 billion, up 21.0% from $1.0 billion at the end of the same quarter last year. Cash provided by operations for the quarter was $8.1 million.

Nine Month Results

Revenue for the first nine months was $1.1 billion, up 9.8% from $1.0 billion, and revenue, net of subcontractor costs, was $737.5 million, an increase of 4.2% from $707.7 million for the same period last year.  Income from operations for the first nine months was $61.8 million, up 24.9% from $49.5 million for the same period last year.  Net income for the first nine months was $32.3 million, up 29.9% from $24.8 million for the same period last year.  Diluted EPS for the first nine months was $0.55, up 27.9% from $0.43 for the same period last year.

Reflecting on the third quarter results, Tetra Tech CEO Dan Batrack stated, “Our solid performance continued in the third quarter, and strong, broad-based demand for our services resulted in new record backlog of over $1.2 billion.  We are pleased to note continued strength in our operating margin, which reflects an improved business mix and, in part, the effect of our emphasis on growing our commercial business.”




 

 

 

Three Months Ended

 

Nine Months Ended

 

In thousands (except EPS data)

 

July 1,
2007

 

July 2,
2006

 

July 1,
2007

 

July 2,
2006

 

Revenue

 

$

403,951

 

$

359,055

 

$

1,119,123

 

$

1,109,139

 

Revenue, net of subcontractor costs

 

256,326

 

240,219

 

737,456

 

707,694

 

Income from operations

 

22,084

 

16,140

 

61,828

 

49,487

 

Interest expense, net

 

(656

)

(1,212

)

(1,901

)

(5,317

)

Loss on retirement of debt

 

 

 

(4,226

)

 

Income tax expense

 

(9,026

)

(6,549

)

(23,490

)

(19,198

)

Income from continuing operations

 

12,402

 

8,379

 

32,211

 

24,972

 

Income (loss) from discontinued operations, net of tax

 

26

 

(533

)

52

 

(139

)

Net income

 

$

12,428

 

$

7,846

 

$

32,263

 

$

24,833

 

 

 

 

 

 

 

 

 

 

 

Basic EPS:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.21

 

$

0.15

 

$

0.56

 

$

0.43

 

Loss from discontinued operations, net of tax

 

 

(0.01

)

 

 

Net income

 

$

0.21

 

$

0.14

 

$

0.56

 

$

0.43

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.21

 

$

0.14

 

$

0.55

 

$

0.43

 

Income from discontinued operations, net of tax

 

 

 

 

 

Net income

 

$

0.21

 

$

0.14

 

$

0.55

 

$

0.43

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

58,030

 

57,476

 

57,859

 

57,280

 

Diluted

 

58,786

 

58,039

 

58,452

 

57,829

 

 

2




Business Outlook

The following statements are based on current expectations.  These statements are forward-looking and the actual results could differ materially.  These statements do not include the potential impact of transactions that may be completed or developments that become evident after the date of this release.  The Business Outlook section should be read in conjunction with the information on forward-looking statements at the end of this release.

Tetra Tech expects diluted EPS for the fourth quarter of fiscal 2007 to be in the range of $0.21 to $0.22.  Revenue, net of subcontractor costs, for the fourth quarter is expected to range from $255 million to $270 million.  For fiscal 2007, Tetra Tech now expects diluted EPS to be $0.76 to $0.77.  Revenue, net of subcontractor costs, for fiscal 2007 is expected to range from $992 million to $1,007 million.

Webcast

Investors will have the opportunity to access a live audio-visual webcast and supplemental financial information concerning the third quarter results through a link posted on the Company’s web site at www.tetratech.com on August 2, 2007 at 8:00 a.m. (PDT).

About Tetra Tech (www.tetratech.com)

Tetra Tech is a leading provider of consulting, engineering, and technical services. With approximately 7,500 associates located in the United States and internationally, the Company supports commercial and government clients in the areas of resource management and infrastructure.  Tetra Tech’s services include research and development, applied science and technology, engineering design, program management, construction management, and operations and maintenance.

CONTACTS:
Jorge Casado, Investor Relations
Talia Starkey, Media & Public Relations
(626) 351-4664

Forward-Looking Statements

This news release contains forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include information concerning future events and the future financial performance of Tetra Tech that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. Readers are urged to read the documents filed by Tetra Tech with the SEC, specifically the most recent reports on Form 10-K, 10-Q, and 8-K, each as it may be amended from time to time, which identify risk factors that could cause actual results to differ materially from the forward-looking statements. Among the important factors or risks that could cause actual results or events to differ materially from those in the forward-looking statements in this release are: fluctuations in quarterly operating results; the impact of downturns in the financial markets and reductions in government budgets; volatility of common stock value; concentration of revenues from government agencies and funding disruptions by these agencies; failure to properly manage projects; acquisition strategy risks; management of growth strategy; use of the percentage-of-completion method of accounting; adverse resolution of an IRS examination; loss of key personnel or the inability to attract and retain qualified personnel; implementation of the enterprise resource planning system; international operations risks; credit risks associated with commercial clients; violations of government contractor regulations; competitive bidding for government contracts; the affect of a negative government audit; the inability to accurately estimate contract risks, revenue, and costs; backlog cancellation and adjustments; client base consolidation; failure of partners to perform on joint projects; inability to find qualified subcontractors; changes in existing environmental laws, regulations, or programs; competition; restrictive covenants in debt agreements; risks of professional and other liabilities; adverse resolution of litigation; conflict of interest issues; changes in accounting for equity-related compensation; expenses associated with corporate governance; and disruption of operations due to computer viruses or terrorism. Any projections in this release are based on limited information currently available to Tetra Tech, which is subject to change. Although any such projections and the factors influencing them will likely change, Tetra Tech will not necessarily update the information, since Tetra Tech will only provide guidance at certain points during the year. Readers should not place undue reliance on forward-looking statements since such information speaks only as of the date of this release.

3




TETRA TECH, INC.
Condensed Consolidated Balance Sheets
(in thousands, except par value)

 

 

July 1,
2007

 

October 1,
2006

 

 

 

(Unaudited)

 

Assets

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

37,646

 

$

65,353

 

Accounts receivable - net

 

420,145

 

346,543

 

Prepaid expenses and other current assets

 

24,232

 

21,757

 

Income taxes receivable

 

6,799

 

5,063

 

Current assets of discontinued operations

 

445

 

865

 

Total current assets

 

489,267

 

439,581

 

Property and equipment:

 

 

 

 

 

Land and buildings

 

5,261

 

1,810

 

Equipment, furniture and fixtures

 

91,482

 

77,415

 

Leasehold improvements

 

9,488

 

8,798

 

Total

 

106,231

 

88,023

 

Accumulated depreciation and amortization

 

(61,125

)

(56,033

)

Property and equipment - net

 

45,106

 

31,990

 

Deferred income taxes

 

10,577

 

12,909

 

Income taxes receivable

 

33,800

 

33,800

 

Goodwill

 

182,467

 

158,581

 

Intangible assets - net

 

7,650

 

4,507

 

Other assets

 

15,932

 

17,893

 

Non-current assets of discontinued operations

 

2,418

 

2,418

 

Total Assets

 

$

787,217

 

$

701,679

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

137,957

 

$

104,626

 

Accrued compensation

 

62,973

 

67,592

 

Billing in excess of costs on uncompleted contracts

 

55,635

 

41,345

 

Deferred income taxes

 

17,160

 

15,386

 

Current portion of long-term obligations

 

3,354

 

17,760

 

Other current liabilities

 

35,965

 

42,200

 

Current liabilities of discontinued operations

 

7

 

359

 

Total current liabilities

 

313,051

 

289,268

 

Long-term obligations

 

75,354

 

57,608

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Preferred stock - authorized, 2,000 shares of $0.01 par value; no shares issued and outstanding as of July 1, 2007 and October 1, 2006

 

 

 

Common stock - authorized, 85,000 shares of $0.01 par value; issued and outstanding 58,177 and 57,676 shares as of July 1, 2007 and October 1, 2006, respectively

 

583

 

577

 

Additional paid in capital

 

277,196

 

265,444

 

Accumulated other comprehensive (loss) income

 

(11

)

1

 

Retained earnings

 

121,044

 

88,781

 

Total stockholders’ equity

 

398,812

 

354,803

 

Total Liabilities and Stockholders’ Equity

 

$

787,217

 

$

701,679

 

 




TETRA TECH, INC.

Condensed Consolidated Statements of Income

(unaudited - in thousands, except per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

July 1,

 

July 2,

 

July 1,

 

July 2,

 

 

 

2007

 

2006

 

2007

 

2006

 

Revenue

 

$

403,951

 

$

359,055

 

$

1,119,123

 

$

1,019,139

 

Subcontractor costs

 

147,625

 

118,836

 

381,667

 

311,445

 

Revenue, net of subcontractor costs

 

256,326

 

240,219

 

737,456

 

707,694

 

Other contract costs

 

202,313

 

196,967

 

593,877

 

573,494

 

Gross profit

 

54,013

 

43,252

 

143,579

 

134,200

 

Selling, general and administrative expenses

 

31,929

 

27,112

 

81,751

 

84,713

 

Income from operations

 

22,084

 

16,140

 

61,828

 

49,487

 

Interest expense - net

 

656

 

1,212

 

1,901

 

5,317

 

Loss on retirement of debt

 

 

 

4,226

 

 

Income from continuing operations before income tax expense

 

21,428

 

14,928

 

55,701

 

44,170

 

Income tax expense

 

9,026

 

6,549

 

23,490

 

19,198

 

Income from continuing operations

 

12,402

 

8,379

 

32,211

 

24,972

 

Income (loss) from discontinued operations, net of tax

 

26

 

(533

)

52

 

(139

)

Net income

 

$

12,428

 

$

7,846

 

$

32,263

 

$

24,833

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.21

 

$

0.15

 

$

0.56

 

$

0.43

 

Loss from discontinued operations, net of tax

 

 

(0.01

)

 

 

Net income

 

$

0.21

 

$

0.14

 

$

0.56

 

$

0.43

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.21

 

$

0.14

 

$

0.55

 

$

0.43

 

Income from discontinued operations, net of tax

 

 

 

 

 

Net income

 

$

0.21

 

$

0.14

 

$

0.55

 

$

0.43

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

58,030

 

57,476

 

57,859

 

57,280

 

Diluted

 

58,786

 

58,039

 

58,452

 

57,829

 

 




TETRA TECH, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

 

 

 

Nine Months Ended

 

 

 

July 1,

 

July 2,

 

 

 

2007

 

2006

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

32,263

 

$

24,833

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

9,841

 

9,749

 

Stock-based compensation

 

4,242

 

5,239

 

Deferred income taxes

 

4,106

 

8,505

 

Write-off of unamortized debt financing costs

 

1,069

 

 

Provision for losses on contracts and related receivables

 

1,737

 

42

 

Gain on sale of discontinued operations

 

(262

)

(1,415

)

Gain on disposal of property and equipment

 

(341

)

(71

)

 

 

 

 

 

 

Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:

 

 

 

 

 

Accounts receivable

 

(66,272

)

(5,329

)

Prepaid expenses and other assets

 

(2,294

)

889

 

Accounts payable

 

28,636

 

(12,273

)

Accrued compensation

 

(4,619

)

5,661

 

Billings in excess of costs on uncompleted contracts

 

9,131

 

(6,876

)

Other current liabilities

 

(4,448

)

(4,353

)

Income taxes receivable/payable

 

(625

)

4,360

 

Net cash provided by operating activities

 

12,164

 

28,961

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(8,124

)

(8,425

)

Payments for business acquisitions, net of cash acquired

 

(30,174

)

(1,994

)

Proceeds from sale of discontinued operations

 

3,045

 

4,632

 

Proceeds from sale of property and equipment

 

425

 

177

 

Net cash used in investing activities

 

(34,828

)

(5,610

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Payments on long-term obligations

 

(98,410

)

(28,041

)

Proceeds from borrowings under long-term obligations

 

88,000

 

10,000

 

Payment of deferred financing fees

 

(1,032

)

 

Net proceeds from issuance of common stock

 

6,399

 

6,509

 

Net cash used in financing activities

 

(5,043

)

(11,532

)

 

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

(27,707

)

11,819

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

65,353

 

26,861

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

37,646

 

$

38,680

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

5,552

 

$

8,173

 

Income taxes, net of refunds received

 

20,019

 

$

6,567